SriLankan maintains profits

SriLankan Airlines Limited and the SriLankan Airlines Group both
achieved significant profits during the last financial year, despite a
sharp downturn in Sri Lanka’s tourism industry and a steep rise in the
price of aviation fuel.Tourist arrivals slowed down as foreign governments issued travel
advisories against visiting Sri Lanka, following the escalation of
hostilities in the country’s internal conflict which placed the country
and its capital under security threats.

The average price of jet fuel reached USD 82 per barrel in 2006, as
against USD 71 in 2005. As a result, the annual fuel bill of the company
increased to USD 224.9 million from USD 190.5 million in the previous
year, an increase of USD 34.4 million or 18%.


D.H.S. Jayawardena, Chairman, SriLankan Airlines said: “This financial
performance was made possible by the tireless efforts of the management
and staff of SriLankan Airlines and SriLankan Catering to mitigate the
impact of adverse factors through innovative and efficient business
strategies and stringent control of costs. The financial year under
review was so far the most challenging year for the airline in its
twenty-seven year history.”



The Group achieved a Net Profit After Tax of Rs. 862.18 million for the
financial year 2006/07, down 50% from the previous year. It was the
fifth year in succession that the Group, which consists of SriLankan
Airlines Limited and its fully owned subsidiary SriLankan Catering
(Private) Limited, recorded a profit. The company, SriLankan Airlines
Ltd,  made a profit of Rs. 568.04 million, an increase of Rs. 91.51
million over the previous year’s Rs. 476.53 million (restated).


Tim Clark, Managing Director, said: “The largest single factor that
affected the airline’s bottom-line was the return to hostilities in Sri
Lanka’s internal conflict. The resultant travel advisories against
visiting Sri Lanka brought very serious consequences on traditional
markets such as Japan, the United Kingdom, Germany and France.”


Peter Hill, CEO, said: “The SriLankan Airlines Group has now been
profitable for seven of the nine years since privatization. The
management decision taken several years ago to develop Colombo as a hub,
focused on developing passenger and cargo traffic to and from South Asia
has been the key to our success. SriLankan would indeed have been in
dire straits had we relied on the earlier more traditional traffic flows
to and from Colombo.”


SriLankan used its position as the most frequent foreign carrier into
India, where it now has 95 flights per week to 10 cities, to connect
global travellers to the Subcontinent through Colombo. But the National
Carrier also continued to be one of the most active supporters of
tourism into Sri Lanka, and invested heavily in the country’s
promotional campaigns.


Despite these challenges, the airline continued with its expansion
plans, launching services to Goa and Jeddah and doubling frequencies to
Mumbai. Direct flights were reintroduced to Paris, Frankfurt, Bahrain,
and Doha, providing greater passenger convenience, and capacity was
increased to Kuwait, Abu Dhabi, Doha, Bahrain, Bangalore and Calicut.


SriLankan Catering commissioned its USD 25 million (Rs. 2.5 billion)
state-of-the-art Flight Kitchen, a considerable investment in the future
of Sri Lanka. SriLankan Cargo set yet another record for tonnage handled
at the BIA Cargo Centre, on the strength of positioning Colombo as a hub
for India’s rapidly growing economy.


SriLankan also played a leading role in enhancing services at the
Bandaranaike International Airport (BIA). The airline diversified its
revenue streams by re-launching its leisure arm SriLankan Holidays,
expanding maintenance services for other airlines, and launching the
International Aviation Academy. It also invested in some of the latest
innovations in the industry such as E-ticketing and the use of the
Internet for marketing purposes.


Passenger and Cargo Revenues recorded growth rates of 10.67% and 15.24%
respectively against the previous year, and the airline’s Overall Yield
increased by 6.72%.  Passenger Traffic increased by 5.7%.


The Group’s Operating Revenue was Rs. 68,903.70 million, up 10% from the
previous year, and the Airline’s Operating Revenue was Rs. 67,963.76
million, up 11%. The Group’s Operating Expenditure increased by 14% to
Rs. 69,192.17 million, and the Airline’s Operating Expenditure grew by
14% to Rs. 69,403.25 million. Unit Cost increased by 7.12%, mainly due
to the increase in the price of fuel.


Passenger Revenue increased by 10.67%, and growth was seen in Mail
(13.41%), and Air Terminal Services (8.74%).


However, the uncertainty surrounding the management of the airline is
affecting its ability to implement future growth plans, as well as
casting a cloud over the job security of its staff. Emirates’ 10-year
management contract is due to end on 31st March 2008, and discussions
are continuing with the Government of Sri Lanka with regard to its